669 F.

2d 58
7 Media L. Rep. 2562

NEW YORK STATE COMMISSION ON CABLE

TELEVISION, Petitioner,
v.
FEDERAL COMMUNICATIONS COMMISSION and United
States of
America, Respondents,
Teleprompter Corporation and WWHT Corporation,
Intervenors.
No. 296, Docket 80-4253.

United States Court of Appeals,

Second Circuit.
Argued Oct. 29, 1981.
Decided Jan. 7, 1982.

Franklin K. Breselor, Asst. Atty. Gen. of State of New York, Albany, N.Y.
(Robert Abrams, Atty. Gen. of State of New York, William J. Kogan,
Asst. Sol. Gen. of State of New York, Albany, N.Y., of Counsel), for
petitioner.
Lisa B. Margolis, Counsel, F.C.C., Washington, D.C. (Stephen A. Sharp,
Gen. Counsel, F.C.C., Daniel M. Armstrong, Associate Gen. Counsel,
F.C.C., John E. Ingle, Deputy Associate Gen. Counsel, F.C.C., William F.
Baxter, Asst. Atty. Gen. of U.S., Barry M. Grossman, Atty. U.S. Dept. of
Justice, Washington, D.C., of counsel), for respondents.
Gardner F. Gillespie, Washington, D.C. (Hogan & Hartson, Jay E. Ricks,
Paul C. Skelly, Washington, D.C., and Barry P. Simon, New York City, of
counsel), for intervenor Teleprompter Corp.
N. Frank Wiggins, Washington, D.C. (Cohn & Marks, Washington, D.C.),
for intervenor WWHT Corp.
Before FEINBERG, Chief Judge, FRIENDLY, Circuit Judge, and
PIERCE, Circuit Judge.*

PIERCE, Circuit Judge:

Since the inception of the American television era, various ideas, technologies,
and services have been developed to enhance the reception of locally-broadcast
video signals and to substantially broaden the programming alternatives
available to viewers. This case raises the issue of whether the Federal
Communications Commission ("FCC") lawfully preempted New York State's
regulation of one of those services.

Background
2

Among the several options available to some television viewers in New York
State are programs delivered by master antenna television ("MATV") systems,
by community antenna television ("CATV") systems, and by Multipoint
Distribution Service ("MDS").

A MATV system, normally installed in multi-unit dwellings such as apartment

houses, consists of a rooftop antenna attached to a network of wires which
extend into each living unit of the building. The rooftop antenna receives
locally broadcast VHF and UHF signals and relays them to the viewers.
Reception is normally improved because of the absence of obstructions and the
height of the antenna.

In a CATV or cable television system, broadcast signals are initially received at

the CATV station. Distant signals are transmitted to the station via satellite and
microwave. The signals are amplified and "cleaned" at the station, and then
transmitted to the consumer by cable or wire. See FCC v. Midwest Video
Corp., 440 U.S. 689, 697 n.6, 99 S.Ct. 1435, 1440 n.6, 59 L.Ed.2d 692 (1979);
United States v. Southwestern Cable Co., 392 U.S. 157, 161-64, 88 S.Ct. 1994,
1996-98, 20 L.Ed.2d 1001 (1968).

A common carrier system in the MDS consists of a fixed station which

transmits high frequency signals omnidirectionally to fixed receivers with
directional antennas. The signal is intercepted by a parabolic antenna, converted
from microwave frequency to a selected lower frequency by a downconverter,
passed through a decoder which activates only the intended receivers, and,
finally, is displayed on an unused channel on the viewer's television set.1
Again, in a multi-unit dwelling, a network of wires is utilized to deliver the
signal to each unit.

Atop the Empire State Building in New York City is station WQQ-79, which

Atop the Empire State Building in New York City is station WQQ-79, which
operates under a license granted to Microband Corporation of America
("Microband") by the FCC. It transmits MDS signals to receivers within a 35
mile radius, including points in New York, New Jersey, and Connecticut.
Among WQQ-79's customers, for which it transmits programming, is Home
Box Office, Inc. ("HBO"), a company which supplies entertainment programs
to the viewing public for a fee. WQQ-79 transmits HBO's programming to
some 233 MATV and CATV reception points serving an estimated 110,950
subscribers. Like any other customer of a MDS station, HBO provides the
programming and specifies the receive points and time of transmission. HBO,
however, does not itself market the programming. Instead, it engages the
services of middlement, such as Orth-O-Vision, Inc. ("Orth-O-Vision"), to
market its services to apartment dwellers. In order to reach an apartment
resident, WQQ-79 typically sends the video material provided by HBO to a
rooftop antenna connected to the necessary downconverter and decoder. The
signal is then delivered to the customer's home television set through the wires
of a MATV system.

In 1972, the New York State legislature created the New York State
Commission on Cable Television ("State Commission") and gave it regulatory
jurisdiction over all "cable television systems." N.Y. Executive Law, Art. 28.
By statute, a "cable television system"2 does not include a "master antenna
television system."3 In two orders entitled Clarification of Policy in Docket No.
90085 dated October 22, 1976 ("Clarification") and Further Clarification and
Modification of Policy dated April 4, 1977 ("Further Clarification"), the State
Commission ruled that the statutory definition of a MATV system did not
encompass any MATV system which provides pay programming or which
allows the reception of programming which could not be received from locally
viewable off-the-air broadcast signals. Thus, a MATV system which delivered
down converted and decoded MDS signals was not considered a "master
antenna television system" under the statute and would be regulated as a "cable
television system." Importantly, such a system could not operate without first
obtaining a franchise from the local municipality pursuant to N.Y. Executive
Law 819.4

By its "Petition for Expedited Relief" filed on March 11, 1977, Orth-O-Vision,
a marketer of HBO's pay television service in the Borough of Queens, New
York, requested the FCC to preclude the State Commission from regulating or
prohibiting the reception of pay programming sold by Orth-O-Vision which
was transmitted from WQQ-79 to MATV systems in multi-unit dwellings in
Queens. On March 21, 1977, the FCC placed the petition on public notice5 and
solicited comments from interested parties.6 In a decision released on
September 22, 1978, the FCC, treating Orth-O-Vision's petition as a petition for

a declaratory ruling, ruled that the State Commission's policies enunciated in its
Clarification and Further Clarification were void as preempted "to the extent
that their effect will be to prohibit the receipt of federally-authorized MDS
transmissions of HBO's programming." In re Orth-O-Vision, Inc., 69 F.C.C.2d
657, 671 (1978) ("First Order"). In subsequently denying the State
Commission's petition for reconsideration, the FCC made clear that its prior
ruling was not limited to HBO programming, but applied to any MDS
transmissions which were impeded by state regulation of MATV systems. In re
Orth-O-Vision, Inc., 82 F.C.C.2d 178, 179, 185 (1980) ("Second Order").7
9

In the petition for review now before us, 8 the State Commission contends that
the FCC incorrectly found that the State's regulation of MATV systems, as
applied, impeded service in the MDS; that even if it did impede MDS service,
the State's regulation only affected intrastate MDS transmissions, over which
the FCC has no jurisdiction; and, finally, that the FCC's rulings were
impermissibly vague.9 For the reasons stated below, the State Commission's
petition for review is denied.

Discussion
10

Under the Supremacy Clause of the Constitution, Art. VI, cl. 2, a federal law
preempts state law when the state law "stands as an obstacle to the
accomplishment and execution of the full purposes and objectives of
Congress." Hines v. Davidowitz, 312 U.S. 52, 67, 61 S.Ct. 399, 404, 85 L.Ed.
581 (1941); see Chicago & North Western Transportation Co. v. Kalo Brick &
Tile Co., 450 U.S. 311, 317, 101 S.Ct. 1124, 1130, 67 L.Ed.2d 258 (1981);
Florida Lime & Avocado Growers, Inc. v. Paul, 373 U.S. 132, 142, 83 S.Ct.
1210, 1217, 10 L.Ed.2d 248 (1963). Even in an area where Congress has not
completely foreclosed state regulation, "a state statute is void to the extent that
it actually conflicts with a valid federal statute." Ray v. Atlantic Richfield Co.,
435 U.S. 151, 158, 98 S.Ct. 988, 994, 55 L.Ed.2d 179 (1978); Jones v. Rath
Packing Co., 430 U.S. 519, 525-26, 97 S.Ct. 1305, 1309-10, 51 L.Ed.2d 604
(1977). The federal preemptive authority may be "explicitly stated in the
(federal) statute's language or implicitly contained in its structure and purpose."
Id. at 525, 97 S.Ct. at 1309. In determining whether it conflicts with the federal
law, the Court must look to the effect, rather than the purpose of the state law.
Perez v. Campbell, 402 U.S. 637, 652, 91 S.Ct. 1704, 1712, 29 L.Ed.2d 233
(1971). In a similar vein, the Supreme Court has instructed courts "to consider
the relationship between state and federal laws as they are interpreted and
applied, not merely as they are written." Jones, 430 U.S. at 526, 97 S.Ct. at
1310.

11

Pursuant to the foregoing guidelines, we will examine the effect of the State
Commission's regulation, the FCC's regulatory authority, and finally, the
conflict between the two regulatory schemes. Initially, however, we note that
the scope of our review of the FCC's declaratory orders is prescribed by 5
U.S.C. 706(2)(A)-(D). 10 Under those provisions, the Court must set aside
"agency action, findings, and conclusions found to be arbitrary, capricious, an
abuse of discretion, or otherwise not in accordance with law" or action which
fails to meet constitutional, jurisdictional, or procedural requirements. See
Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 413-14, 91 S.Ct.
814, 822, 28 L.Ed.2d 136 (1970). Under the "arbitrary or capricious" standard
of review-a "narrow" standard, id. at 416, 91 S.Ct. at 823-the Court may only
invalidate agency action that is "not based on a consideration of relevant
factors" and not rational. FCC v. National Citizens Committee for
Broadcasting, 436 U.S. 775, 803, 98 S.Ct. 2096, 2116, 56 L.Ed.2d 697 (1978);
Citizens to Protect Overton Park, Inc., 401 U.S. at 416, 91 S.Ct. at 823.
Although our review must be "searching and careful," we are not empowered to
substitute our judgment for that of the agency. National Citizens Committee for
Broadcasting, 436 U.S. at 803, 98 S.Ct. at 2116, quoting, Citizens to Preserve
Overton Park, Inc., 401 U.S. at 416, 91 S.Ct. at 823; see Malrite T.V. of New
York v. FCC, 652 F.2d 1140, 1149 (2d Cir. 1981), cert. pet. filed, 50 U.S.L.W.
3177 (Sept. 14, 1981).

A. Effect of State Commission's Regulation

12

Programming transmitted via MDS is received by rooftop antenna,

downconverted and decoded, then delivered to the consumer by wire or cable.
In the case of a multi-unit dwelling, the MDS reception equipment is attached
to a MATV system. Delivery of the MDS signal to each individual viewer is
effected through the MATV system's wiring network. In its First Order, the
FCC found that in order for Orth-O-Vision customers in Queens to receive
material transmitted by MDS, WQQ-79 must use a MATV system to deliver its
material from the rooftop reception antenna to home television sets. 69
F.C.C.2d at 668. The FCC found that "the MATV system to which MDS
reception equipment is attached is an integral and necessary part of the
transmission of HBO's programming by WQQ-79's signals to Orth-O-Vision's
customers." Id. The FCC confirmed those findings in its Second Order, and
further found that "the provision of pay TV service to apartment buildings and
hotels constitutes a significant portion of the services offered by MDS facilities
and ... the use of MATV distribution circuitry is generally the most economical
way to deliver service in these buildings." 82 F.C.C.2d at 183.

13

The State Commission contends that MATV systems are not integral or

necessary for the delivery of MDS signals to residents of multi-unit dwellings,

since the signal could be delivered by other means. This argument, however,
ignores the FCC's unchallenged finding that delivery of MDS services is most
economically provided by MATV circuitry. Further, the slim possibility of an
alternative, currently unexercised mode of delivery cannot render arbitrary or
capricious an agency finding based on the present state of affairs. In short, the
FCC reasonably found that MATV distribution circuitry was a necessary and
integral part of MDS service.
14

After noting the integral connection between MATV systems and the receipt of
programming transmitted via MDS, the FCC found that the object of the State
Commission's action was to permit municipalities, by denial of franchises, to
terminate MDS programming transmitted to multi-unit dwellings, and thereby
curtail MDS as a competitor of conventional cable television systems. 69
F.C.C.2d at 662, 666. Notably, the FCC concluded that the practical effect of
the State's regulation of MATV systems was to interfere with, burden, and limit
service provided by MDS. 69 F.C.C.2d at 668-69; 82 F.C.C.2d at 182-84.

15

The State Commission claims that the FCC erred in finding that it sought to
encourage the denial of municipal franchises to MATV systems attached to
MDS receiving equipment, and the State Commission asserts that it has no
policy of discouraging the grant of franchises to such MATV systems. We
initially note that the State Commission's contention is largely irrelevant since
we must consider the effect rather than the purpose of the state regulation. In
any event, its argument is belied by its admission in the Clarification, at 8-9,
upon which the FCC relied, that "(w)e anticipate that most (MATV) systems
will choose to reduce services to gain the matv system exception and we
encourage them to do so." (Emphasis supplied).

16

As to effects, the FCC found that the State Commission's policy had already
had an actual impact upon MDS service. On November 17, 1977, New York
City denied Orth-O-Vision's application for a cable television franchise. As a
result, HBO refused to supply Orth-O-Vision with pay programming for new
customers. 69 F.C.C.2d at 662. In its Second Order, the FCC stated that the
mere issuance of the State Commission's Clarification and Further Clarification
has had a "chilling effect" upon MDS development in New York City. 82
F.C.C.2d at 184. Based upon the foregoing findings, the FCC reasonably
concluded that the State's regulations of MATV systems had an adverse effect
on MDS development by allowing and causing a reduction in MDS reception
points.

17

Equally supportable and lawful is the FCC's conclusion that the State's

regulation burdened interstate MDS development. The State Commission does

not challenge the FCC's findings that the cost of MDS transmission time is
fairly constant relative to the number of receive points, and, therefore, a
reduction in the number of receive points causes the cost for each program per
receiver to increase. 69 F.C.C.2d at 669. Given this relationship, WQQ-79's
transmissions cannot, contrary to the State Commission's contention, be split
into interstate and intrastate components. A reduction in the number of
reception points in New York increases the per viewer cost of transmission to
New Jersey and Connecticut. Id. In addition, as the FCC noted, "Station WQQ79 is part of a national network of Microband owned and operated MDS
stations in ten states contemporaneously interconnected via a domestic
communications satellite." Id. at 660. Microband intends to expand its existing
services to create a "full-fledged interstate (MDS) network," which would be
linked by domestic satellite and terrestrial microwave stations. Id. at 660 n.4.
This alone gives MDS an interstate character. See United States v.
Southwestern Cable Co., 392 U.S. 157, 168-69, 88 S.Ct. 1994, 2000, 20
L.Ed.2d 1001 (1968). Further, given this nationwide link between various MDS
stations, the FCC has long considered MDS to be an interstate service. See
Second Report and Order in Docket No. 20490, 76 F.C.C.2d 273 (1980); In re
Midwest Video Corp., 38 F.C.C.2d 897, 899-900 (1973), reconsideration
denied, 53 F.C.C.2d 294, 300-01 (1975). In sum, the FCC was not arbitrary and
capricious in finding that the State Commission's regulation of MATV systems
affected interstate communications services provided by MDS.
B. The FCC's Regulatory Interest
18

In 1934 Congress enacted the Communications Act (the "Act") and created the
FCC for the purpose of regulating "communication by wire and radio so as to
make available ... to all the people of the United States a rapid, efficient,
Nation-wide, and world-wide wire and radio communication service...." 47
U.S.C. 151. Under 47 U.S.C. 152(a), Congress directed the FCC to regulate
all interstate and foreign communication by wire or radio.11 See United States
v. Southwestern Cable Co., 392 U.S. at 172-73, 88 S.Ct. at 2002-03 (1968).
Moreover, the FCC is empowered to "perform any and all acts, make such rules
and regulations, and issue such orders, not inconsistent with this chapter, as
may be necessary in the execution of its functions." 47 U.S.C. 154(i).
Congress gave the FCC broad authority, so as to "maintain, through appropriate
administrative control, (the federal government's) grip on the dynamic aspects
of radio transmission." FCC v. Midwest Video Corp., 440 U.S. at 696, 99 S.Ct.
at 1441, quoting, FCC v. Pottsville Broadcasting Co., 309 U.S. 134, 138, 60
S.Ct. 437, 439, 84 L.Ed. 656 (1940).

19

As to more specific powers of the FCC, Title II of the Act, 47 U.S.C. 201 et

19

As to more specific powers of the FCC, Title II of the Act, 47 U.S.C. 201 et
seq., concerns the regulation of common carriers engaged in interstate
communications by wire or radio, and Title III of the Act, 47 U.S.C. 301 et
seq., governs the FCC's authority over radio communication. Congress has
instructed the FCC to "encourage the larger and more effective use of radio in
the public interest," 47 U.S.C. 303(g), see National Broadcasting Co. v.
United States, 319 U.S. 190, 219, 63 S.Ct. 997, 1010, 87 L.Ed. 1344 (1943),
and to maintain federal control "over all the channels of interstate and foreign
radio transmission." 47 U.S.C. 301. To carry out its mandate, Congress
empowered the FCC to "(m)ake such rules and regulations and prescribe such
restrictions and conditions, not inconsistent with law, as may be necessary to
carry out the provisions of this chapter ..." 47 U.S.C. 303(r).

20

Since MDS operators are communications common carriers, they must adhere
to the requirements of Title II. See 47 C.F.R. 21.900 et seq. In addition,
operators are subject to the licensing requirement of Title III because MDS
uses radio signals. Contrary to the State Commission's contention, 47 U.S.C.
152(b) does not bar the FCC's assertion of authority over WQQ-79's MDS
transmissions or any other MDS transmissions. Section 152(b) states that the
FCC has no jurisdiction to regulate intrastate communication service by wire or
radio. As previously discussed, WQQ-79's service and MDS in general is
interstate service; thus, 152(b) is inapplicable.12

C. Conflict in the Regulatory Schemes and the Need for Preemption

21
22

Pursuant to the Congressional mandate expressed in the Act, the FCC is

empowered to promote the development of a nationwide MDS service. The
FCC did not act arbitrarily or capriciously or outside its jurisdiction in finding
that "it has an immediate and preeminent interest in the development of MDS
service as a whole." 69 F.C.C.2d at 669. The FCC recognized that a nationwide
MDS system, comprised of large numbers of MDS reception points linked by
domestic satellite and terrestrial microwave stations, could provide
simultaneous inexpensive transmission of many different forms of
programming.13 Id. In fact, the licensee of station WQQ-79, Microband, is
developing such an interstate system. The State Commission's policy, which, as
discussed supra, has the effect of reducing the number of MDS receive points in
New York,14 could frustrate the development of an interstate MDS network by
increasing the cost for each program per receiver.15 To allow each State to
impose regulations, which, like New York's, effectively reduce the number of
MDS receive points would impose an impermissible burden on interstate MDS
service. Clearly, the State Commission's policy stands as an obstacle to the
FCC's accomplishment of its objective of promoting the development of an
interstate MDS network.

23

Contrary to the State Commission's contentions, the FCC's preemption order is

not invalidated by its failure to impose its own regulations directly upon MATV
systems which are used to distribute MDS signals. This Court has upheld the
FCC's preemption of state and local price regulation of one type of cable
television programming where the FCC's policy was to delay all price
regulation so as to allow free-market pricing. Brookhaven Cable TV, Inc. v.
Kelly, 573 F.2d 765 (2d Cir.), cert. denied, 441 U.S. 904, 99 S.Ct. 1991, 60
L.Ed.2d 372 (1978), aff'g, 428 F.Supp. 1216 (N.D.N.Y.1977); see National
Association of Regulatory Utility Commissioners v. FCC, 525 F.2d 630, 646
(D.C.Cir.), cert. denied, 425 U.S. 992, 96 S.Ct. 2203, 48 L.Ed.2d 816 (1976).
Federal regulation need not be heavy-handed in order to preempt state
regulation.

Vagueness
24

The State Commission's final argument is that the FCC orders are void for
vagueness. This argument, founded on the State Commission's recitation of
several issues which it contends remain unclear after the FCC's action,16 was
raised in its petition for reconsideration before the FCC. In denying that
petition, the FCC rejected the same vagueness arguments raised here and stated
"we believe (our First Order) is sufficiently clear in informing (the State
Commission) that the establishment of any policy or rule, by definition or any
other device, that has the effect of limiting or adversely affecting interstate
MDS service is preempted." 82 F.C.C.2d at 185. An agency's adjudicative
order, based upon adequately articulated factual and legal premises,17 is not
impermissibly vague simply because borderline hypotheticals could be
envisioned which may not be explicitly covered by the order. See Lafayette
Radio Electronics Corp. v. United States, 345 F.2d 278, 281-82 (2d Cir. 1965);
cf. Erie-Lackawanna Railroad Co. v. United States, 279 F.Supp. 316, 351
(S.D.N.Y.1967) (three judge court) (Friendly, J.) (administrative agency need
not deal with every possibility no matter how unlikely), modified and
remanded, Penn-Central Merger and N & W Inclusion Cases, 389 U.S. 486, 88
S.Ct. 602, 19 L.Ed.2d 723 (1968). Given the fact that the FCC adequately
stated the factual and legal underpinnings of its orders and clarified its First
Order upon reconsideration, the State Commission's challenge on vagueness
grounds is without merit.

Conclusion
25

The State Commission's petition for review is denied.

When this appeal was heard, Judge Pierce was a District Judge for the Southern

When this appeal was heard, Judge Pierce was a District Judge for the Southern
District of New York, sitting by designation. He was inducted as a judge of this
court on November 30, 1981

For a fuller description of MDS, see In re Application of Midwest Corp., 53

F.C.C.2d 294, 296-97 (1975); Report and Order in Docket No. 19493, 45
F.C.C.2d 616, 617-18 (1974)

N.Y. Executive Law 812(2) defines "cable television system" as:

"any system which operates for hire the service of receiving and amplifying
programs broadcast by one or more television or radio stations or any other
programs originated by a cable television company or by any other party, and
distributing such programs by wire, cable, microwave or other means, whether
such means are owned or leased, to persons in one or more municipalities who
subscribe to such service. Such definition does not include:
(a) any system which serves fewer than fifty subscribers; or
(b) any master antenna television system; or
(c) any cable television company which serves at least fifty but fewer than one
thousand subscribers."

N.Y.Executive Law 812(6) defines "master antenna television system" as:

"any system which serves only the residents of one or more apartment
dwellings under common ownership, control or management and any
commercial establishment located on the premises of such apartment house and
which transmits only signals broadcast over the air by stations which may be
normally viewed or heard locally without objectionable interference, and which
does not provide any additional service over its facilities."

Section 819 states:

"1. Notwithstanding any other law, no cable television system, whether or not it
is deemed to occupy or use a public thoroughfare, may commence operations or
expand the area it serves after April first, nineteen hundred seventy-three unless
it has been franchised by each municipality in which it proposes to provide or
extend service.
"2. A municipality shall have the power to require a franchise of any cable
television system providing service within the municipality, notwithstanding
that said cable television system does not occupy, use or in any way traverse a
public street. The provision of any municipal charter or other law authorizing a

municipality to require and grant franchises is hereby enlarged and expanded,

to the extent necessary, to authorize such franchises.
"3. Nothing in this article shall be construed to prevent franchise requirements
in excess of those prescribed by the commission, unless such requirement is
inconsistent with this article or any regulation, policy or procedure of the
commission."
5

Copies of the public notice were presumably available at the FCC's general
information office. See 47 C.F.R. 0.443. By post-argument letter filed with
the Court on November 3, 1981, counsel for the FCC indicated that no
announcement of the filing of the petition was published in the Federal Register

Comments in support of the petition were filed by Teleprompter Corporation

("Teleprompter") (an intervenor herein), Microband, The Prism Company, and
Micro TV, Inc. Comments in opposition were filed by the State Commission,
the City of Rochester, and New York City

Neither FCC Order purported to preempt all state regulation of MATV systems.
Indeed, the Second Order explicitly stated that not all state regulation of MATV
systems would be inconsistent with federal policies. 82 F.C.C.2d at 184 n.10

The State Commission's petition, over which we have jurisdiction pursuant to

28 U.S.C. 2342(1) and 47 U.S.C. 402, was originally filed on December 11,
1980. The petition was withdrawn without prejudice on January 19, 1981, but
was reinstated on April 15, 1981

At oral argument the State Commission raised an argument that it had not
mentioned in its brief but had urged in its petition for reconsideration filed with
the FCC, namely, that the FCC should have proceeded by way of formal
rulemaking rather than by way of a declaratory ruling. The choice between
rulemaking and adjudication rests within the informed discretion of the
administrative agency. N.L.R.B. v. Bell Aerospace Co., 416 U.S. 267, 290-95,
94 S.Ct. 1757, 1769-72, 40 L.Ed.2d 134 (1974); Brookhaven Cable TV, Inc. v.
Kelly, 573 F.2d 765, 768 (2d Cir.), cert. denied, 441 U.S. 904, 99 S.Ct. 1991,
60 L.Ed.2d 372 (1978); see 5 U.S.C. 554(e). The FCC's choice of a
declaratory ruling in this case, after notice and an opportunity for comments by
interested parties, was not an abuse of discretion

10

Section 706(2)(E), which requires agency findings and conclusions made

pursuant to formal rulemaking procedures to be supported by "substantial
evidence", is not applicable because the FCC did not and was not required to
act through formal rulemaking. See note 9 supra. Also inapplicable is 706(2)
(F) since the FCC's factual findings are not subject to trial de novo by this Court

11

The statutory definitions of "communication by wire" and "communication by

radio" include "all instrumentalities, facilities, apparatus, and services (among
other things, the receipt, forwarding, and delivery of communications)
incidental to such transmission(s)." 47 U.S.C. 153(a)-(b)

12

Further, the jurisdictional constraint of 152(b) is subject to 47 U.S.C. 301.

Section 301(d) gives the FCC jurisdiction over radio service "within any State
when the effects of such use extend beyond the borders of said State." Given
the anticipated interconnected nationwide MDS network, intrastate MDS
transmissions could reasonably be said to have "effects" outside the state. Of
course, WQQ-79's transmissions, which were received in New Jersey and
Connecticut as well as New York, certainly had effects outside New York State

13

MDS is presently limited to two channels. The FCC, however, has proposed
rules that might expand the number of channels available to MDS to ten. Notice
of Inquiry, Proposed Rulemaking and Order, General Docket No. 80-112, 45
Fed.Reg. 29323 (May 2, 1980)

14

The FCC's conclusion that the franchise requirement imposed on MATV

systems would cause a reduction in MDS reception points in New York was, in
part, judgmental and predictive in nature. This, however, does not render
arbitrary the FCC's preemption. See FCC v. WNCN Listeners Guild, 450 U.S.
582, 595, 101 S.Ct. 1266, 1274, 67 L.Ed.2d 521 (1981); FCC v. National
Citizens Committee for Broadcasting, 436 U.S. at 813-14, 98 S.Ct. at 2121. The
FCC was not required to delay its action so as to be certain that the anticipated
effect of the State's policy (i.e. the denial of franchises resulting in the reduction
of MDS reception points) actually occurred. See North Carolina Utilities
Commission v. FCC, 537 F.2d 787, 790-91 n.2 (4th Cir.), cert. denied, 429 U.S.
1027, 97 S.Ct. 651, 50 L.Ed.2d 631 (1976). The FCC's finding of a chilling
effect and reasoned judgment that the State regulation would cause a reduction
in receive points was sufficient to support its conclusion that the State law had
an effect on interstate MDS service

15

The State Commission's contention that the effect of its regulation of Orth-OVision on interstate commerce will be minimal is irrelevant, since the FCC is
properly concerned with the overall effect of the State's regulation

16

The State Commission goes so far as to suggest that the FCC's orders could be
read to preempt state franchising of conventional cable television systems. This
result cannot be gleaned from even a strained reading of the FCC's orders and,
in any event, the FCC has specifically disavowed such a policy. Brief for
Respondents, at n.51

17

The sole case relied upon by the State Commission, Public Media Center v.

FCC, 587 F.2d 1322, 1331-32 (D.C.Cir.1978), merely restates the well-settled
proposition that an administrative agency must articulate the reasons for a
particular decision to make possible meaningful review of that decision. See
N.L.R.B. v. Columbia University, 541 F.2d 922, 930 (2d Cir. 1976). Here, the
FCC's reasoning was sufficiently stated to enable meaningful review by this
Court